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If you have one of these lingering questions:
“I have been trading for at least a year and still have not made any profits”
“I want to start trading but have no clue on where and how to start?”
This FREE E-Book is aimed to help you find the answers and kick start your trading journey with the correct mindset and foundation.
Course Director – Harmonic Trader
5 realistic steps to improve your Forex trading in 2019
Throughout my years of trading and as a mentor, these are the two questions I constantly receive from the masses. Hence, I thought that I should write this E-book to capture my thoughts on them. The approach to your trading journey is key to success, one have to approach it with the correct mindset. I have the 5 realistic steps that you can take to achieve the desired results.
Reality Check: Do not get carried away from Prosperity Forex
You need to stop listening to the advertisements you see out there on the internet. “Turning a $5k account into a million of dollars by trading on a hammock on the beach resort”. In reality, trading requires work and discipline.
Think about this, every type of job discipline out there needs work and practice. A surgeon does not get to that level by watching how to operate via YouTube videos. A lawyer does not win cases by just following the latest season of Suits. Your warehouse managers will need to acquire the skills to manage the inventory under his care. Fair enough?
Trading profitably consistently is definitely possible!! However, it comes with properly understanding the market movements, analysing the potential trades and executing them.
Have you heard the term “High risk High returns”? Hence the main focus for new traders is to first manage your risk and expectations. There is no short cut to trading. Once you get it right, then we start looking at higher returns
Aim to achieve 10-20% returns per annum. This is better that keeping your money in the bank. This is very achievable and realistic. Remember, don’t start off with that get rich quick mindset, else you are in for a big disappointment.
Always put a stop loss on your trades
In trading there are always winners and losers. The main aim is to be able to manage & survive the losing trades so that you can live to fight another day. The simplest step to achieve this is to place a stop loss for every trade that you take. It is a fail-safe mechanism to protect your downside. Treat it like a safety net that cushions your fall.
On some occasions you will have trades that are just simply awesome. 10 winning trades in a row, you are feeling on the top of the world and this is when the ego kicks in. The 11th trade can completely go against you and destroy the entire account. I have personally seen this happen many times before to others. Placing that stop loss order is key to protecting your account.
Imagine this scenario, for every trade you take you are only risk 1% of your equity. Mathematically speaking, you will have to lose 100 trades consecutively to fully wipe out your account. Honestly, I believe it is nearly impossible to lose 100 trades in a row.
This fact also debunks the myth that Forex is risky. It is only risky when you do not know what you are doing and taking trades without placing stop losses.
Always place a stop loss for every trade you take. Based on your own risk profile, you have to evaluate your own tolerance level, the stop loss can be 1% of your equity. For those who are more conservative, it can even be halved at 0.5% of your equity. This would mean that you will only bust your account when you lose 200 times in a row. Naturally the more aggressive traders can be risking 2-5% of their equity in a single trade.
Trading strategies with a positive expectancy
Trading has to be treated like a business, weighing the risks and rewards each time an opportunity comes up. Trading is a probability game. Unlike the casino, where the house always holds an edge over the players, in trading we can choose to enter a trade ONLY when the odds are favourable to us.
Would it be possible for us to just force ourselves to take only the good trades?
Of course we can, we have full control over our trading methods !!
In school we have always been thought that marks with less than 50% is a fail. You can get a pat on the back and even possibility of a big year-end bonus with a 50% score in trading.
You can strictly abide by this rule of ONLY taking trades when every dollar you risk gives you the potential to make two dollars. This is what we call a 1:2 risk to reward ratio.
With a 1:2 RRRatio, mathematically you will only need a winning ratio of 35% to be profitable. In another words, only need 4 out of the 10 trades to be winners. I truly believe that this style of trading will be less stressful. It would give you a little bit of leeway to make mistakes/losses.
Understand the win rate of the trading system and the risk to reward ratios that you are adopting. This will naturally give you the profitability expectancy of your trading system. We naturally prefer a system that allows us to make more mistakes but still ends up profitable.
Stick with the trading system for at least 1 year
Newbie traders are usually impatient to make their first million dollars. They expect the market to be like an ATM where they can withdraw cash any time anywhere. Hence, when a trading system fails them temporarily, they will immediately start look for a new trading system to follow. They end up jumping from one system to another system without trying to observe and improve the way they trade.
Most trading strategies are good provided it is being used with a proper risk management rules. However, most traders do not understand that losing is part and parcel of trading, they will become impatient and disheartened easily.
Tell yourself that the market is always right, no one can control it. You need to find a strategy that suits your temperament and stick to it for at least 1 year. Document the trading results, improve the system by cutting down the mistakes and adding filters to avoid the potentially bad trades.
When I first started trading, I even included my mental state of mind I was feeling at that moment when I took the trade. I just wanted to make sure that I was not affected by my personal issues when trading.
You can trade multiple systems but make sure you track them separately so you will know what works and what does not.
Get a proper education partner to guide and improve your trading skills
It is sad to say that the Forex market has so many con-artists out there who will promise you a worldly returned just to deceive you to put your hard-earned money with them. Many newbie traders will flock to them with the hope of making millions overnight but end up poorer than before.
Find a mentor who is willing to guide you and tell you what real trading is all about without the fluff. Mentors will be able to speed up your learning curve by showing you the dos and don’ts in the market as they have already seen the pit falls and know how to avoid them.
Do avoid the all hyped up trading sessions where all the followers seem to be magically making money all the time with no losses recorded at all.